Jobs outlook is bleaker in Maryland Growth prediction of 1.2% trails nation's recent rate; Lagging the U.S. economy; Remember, there's less distance to fall in event of recession


Continued moderate growth for the nation and the state was predicted yesterday, as the U.S. economy steams toward its seventh year of expansion and pulls a sometimes reluctant Maryland along with it.

Mahlon Straszheim, chairman of the Economics Department at the University of Maryland College Park, said he expects Maryland to add jobs at a 1.2 percent annual rate over the next few years, barring state tax cuts or other major changes. That's slower than the 2 percent annual job growth that the country has displayed recently.

"In the national economy, I am very optimistic," Straszheim told a business outlook conference for 1997 given by the Greater Baltimore Committee. "In the state economy, I think the picture is far less encouraging. We have had extremely moderate job growth."

Straszheim and other speakers cast images of continuing declines in Maryland factory employment, more federal job cuts and renewed competition for jobs from neighbor states.

"Maryland has lagged and continues to lag behind the national economy," said Frank Bramble, president and chief executive of First Maryland Bancorp and GBC chairman.

The good news, he added, is that Maryland won't have as far to fall if the economy sinks into recession. "If that isn't grabbing victory from the jaws of defeat, I don't know what else is," he said.

At the same time, though, Maryland will be helped next year by a healthy transportation and warehouse sector, a booming securities industry and what some say are signs of a "friendlier" state business climate.

While Straszheim expects that "we're going to lose several thousand federal jobs a year for the next several years," at the same time, he said, "I think the securities market will be a big plus for this region and continue to grow." He was referring to Baltimore investment firms such as T. Rowe Price, Legg Mason and Alex. Brown, which have been helped by a booming stock market.

GBC's was the first of several regional conferences looking at the 1997 economy. Another will be held Dec. 12 by the Regional Economic Studies Institute at Towson State University. A salient subtext during yesterday's conference had to do with Maryland's business rules and what the state can do to improve them.

Pushed by the GBC, the Maryland Chamber of Commerce and other business organizations, Gov. Parris N. Glendening recently proposed a 10 percent cut in the state's personal income tax, to be phased in over several years. Business had complained that high personal income taxes here hinder companies from recruiting out-of-state executives and force small businesses, many of which pay taxes at personal rates, to move away.

Bramble called the proposed reduction "only the beginning of the process" in making Maryland more competitive. Straszheim argued that Maryland needs to drastically reshape its tax edifice, shifting from an emphasis on taxing income to a focus on taxing retail sales or other consumption.

Maryland's sales taxes are focused more narrowly than those in other states, said Straszheim, who advises the Glendening administration. States that rely heavily on income taxes have grown much more slowly in the 1990s than those that don't, he said, adding that Glendening's tax-cut proposal could add an extra 5,000 Maryland jobs a year -- 0.25 percent growth. If Maryland's economy is a car with a balky transmission, the national economy is a freight train that is carrying it along. Maryland can make some progress or regress on its own, economists say, but its ultimate destination rides on outside factors.

And the outside factors for next year, speakers at the conference said, look good. Inflation continues tame. Interest rates are falling. The national economy shows no sign of dipping into recession.

"I think we're going to have stable growth for some time to come," said Paul A. London, deputy undersecretary for economic affairs in the U.S. Commerce Department. "I think it's more of the same for the next several years."

The recent national election and current economic trends set the stage for "at least a technically balanced budget by the year 2002," said William Galston, professor of the University of Maryland's School of Public Affairs and a former deputy assistant for public policy to President Clinton.

Other economic consequences of the election, according to Galston: "There will be significant cuts in the Medicare program. There will almost certainly be some targeted tax cuts," such as child credits and reducing capital gains taxes.

"There will be a serious discussions of what some have come to call corporate welfare."

And, he said, look for a "moderate rate of economic growth with low inflation."

Pub Date: 12/05/96

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